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Wednesday, December 23, 2009

Early Evidence that Copenhagen's Collapse Might Torment Free Traders

A few days ago, I opined that the failure of the Copenhagen (Non)Agreement on Climate Change to include any multilateral disciplines - indeed any language at all - on carbon tariffs or other border measures could actually embolden eco-protectionists in 2010:

[T]he final Copenhagen "agreement" is actually a pretty big win for the eco-protectionists here and abroad. Without any language on border measures - even hortatory language promising an examination of their positive and negative effects - US protectionists (in the House, Senate or EPA) have carte blanche under the "agreement" to include carbon tariffs in any domestic climate change mitigation measures. And they can even use the Copenhagen collapse - i.e., an alleged failure of developing countries to agree on binding multilateral commitments - as an excuse for why carbon tariffs are (again, allegedly) absolutely essential to maintaining US competitiveness. Their argument here is pretty obvious: developing countries prevented a binding multilateral climate change agreement, and without that agreement, US regulations would allow imports from these same developing countries to destroy the US manufacturing sector. Thus, carbon tariffs are essential, and they're even allowed under the Copenhagen "agreement"!

Unfortunately, it appears that my pessimism was warranted (although a bit too narrowly tailored to the United States alone). As BNA reports (subscription) today, a few EU officials are now clamoring for carbon tariffs, and they're blaming Copenhagen:

European Union environment ministers said Dec. 22 the 27-nation bloc would consider imposing carbon tariffs and other sanctions in the wake of the perceived failure of the Copenhagen climate conference.

Speaking after a session of the EU Environment Council, Swedish Environment Minister Andreas Carlgren said "we should really show that we are not satisfied" with the outcome of Copenhagen, and that the bloc would consider "using our weapons" to compel other economies to tackle rising greenhouse gas emissions.

Teresa Ribera, Spain's secretary of state for climate change, said the bloc should be more "hard-hitting" in its approach to international climate mitigation and adaptation policy.

Sweden currently holds EU's rotating presidency, and Spain will take over its presidency Jan. 1.

The EU could use its financial power more effectively and could make more use of instruments, such as carbon markets to compel action by non-EU countries, Ribera said....

Carlgren said the ministers made the comments amid "disappointment and frustration" in the EU over the Copenhagen outcome.

The ministers did not go into detail on measures that might be put in place, but Ribera said Spain will convene a special meeting of EU environment ministers in Seville, Spain, Jan. 15-17 to discuss the "strategic line" the EU should take in promoting its environmental agenda internationally.

The ministers asked the European Commission, the bloc's executive arm, to prepare for that meeting an analysis of the Copenhagen summit and its results.

Rebecca Harms, a German lawmaker who leads the Green Group in the European Parliament, said EU governments should make a "a serious analysis of last week's failure" and that Spain should adapt its EU presidency program in light of this....

Carlgren said he is expecting a discussion on carbon taxes in Seville, but he added that the EU should not overuse its "weapons."

Threats of border adjustments or taxes for carbon-intensive goods could lead to "fragmented solutions" to the problem of global warming and could undermine the international consensus, Carlgren said.

He added that the Seville meeting would consider the "geopolitical picture" behind the Copenhagen outcome, and that the EU should first and foremost support a "common international system"for tackling climate change.

This is especially important for the less powerful countries because "great powers are always able to live without an international system,"he said....

Hopefully, Carlgren and Ribera's angry advocacy for carbon tariffs either (i) reflects a strategic play to get developing countries to play ball in 2010, or (ii) will subside after the sting of Copenhagen wears off in the new year. And perhaps we shouldn't put too much stock in this outburst, considering that Carlgren voiced reservations about going the unilateralist route, and that other EU officials have loudly opposed carbon tariffs in the past.

Then again, that reasonable EU opposition was before the UN's Copenhagen debacle embarrassed the hell out of all of these international bureaucrats and clearly demonstrated that the big players in the climate game were the United States and the "BASIC" countries (Brazil, South Africa, India and China). If reason has given way to revenge (or just abject frustration), we could be in for a very bumpy 2010 in the EU and elsewhere.

We should know a lot more after those mid-January meetings in Seville, so stay tuned.